Whatever Happened to Common Sense Regulations?

The truth is that there never has been any such thing as common sense regulations when it comes to Registered Investment Advisers (RIA's). Do not get me wrong. I am on the side of disclosure and regulation, because every time you turn around, there is another Ponzi scheme happening. Sadly however, the good guys are stuck complying while the bad guys are out there stealing people's money.

The Securities and Exchange Commission has instituted a new Form for RIA's called a Form CRS which stands for customer or client relationship summary. This is to be kept to two pages by RIA's like my firms.

The Form ADV 2A is also required and that is 22 pages long. The corresponding Form ADV 2B that goes with it is another 14 pages long. My firm's Investment Advisory Agreement is 12 pages.

Of course, because I am a CFP®, I am now subject to even more disclosure to clients. I felt the need to create a new CFP® disclosure document that is 5 pages.

Oh, I almost forgot, if I refer a client to Morningstar to let them manage the client account, then I have to provide their disclosures. This is another 24 pages. But wait. There is more. Morningstar requires a Request for Proposal for each client which varies, but generally you can count on another 20 plus pages.

So, if I take out my trusty HP-12C calculator and add all this up, I come to the laughingly low figure of 85 pages of disclosures.

Oops! I forgot. We have to fill out the paperwork from the qualified custodian, Charles Schwab & Co. Inc. or Fidelity Investments. That will get us up to over 100 pages easily.

Don't you think 85 pages of disclosures is a little too much? Are you going to read all of that from cover to cover, each and every word of it?

See what I mean when I say there is no such thing as common sense these days when it comes to regulations. The good guys are being penalized for the bad guys' bad behavior.

We need to get the requirements down to a simple two or four page requirement and refer the client to our web site if they want more details. That's just my lone opinion from someone out here in the wilderness.